Gce Model Questions Vol1 2019 Financial Accounting Question 14

Practice objective / multiple choice question 14 from the 2019 Gce Model Questions Vol1 Financial Accounting examination.

Gce Model Questions Vol1 2019 Financial Accounting Objective / Multiple Choice Hard Difficulty
Question 14 GCE_MODEL_QUESTIONS_VOL1 • 2019 • FINANCIAL_ACCOUNTING • objective

Three partners A, B and C share profit in the ratio \(3:2:1\). Their capital balances are A \(£120,000\), B \(£80,000\) and C \(£40,000\). The partnership revalues a building whose original cost was \(£200,000\) with accumulated depreciation \(£50,000\); the fair value is \(£250,000\). The revaluation surplus is to be shared in the profit‑sharing ratio. Goodwill is valued at two years' average profit; the average profit for the last three years is \(£60,000\). A new partner D is admitted, contributing \(£90,000\) for a 20 % share of the partnership. Determine (a) the total goodwill recognised and the amount credited to each existing partner, and (b) the cash that D must pay to the existing partners for his share.

Answer Options

A. Goodwill £130,000 (A £65,000, B £43,333, C £21,667); cash paid by D £100,000
Correct Answer B. Goodwill £120,000 (A £60,000, B £40,000, C £20,000); cash paid by D £92,000
C. Goodwill £100,000 (A £50,000, B £33,333, C £16,667); cash paid by D £80,000
D. Goodwill £120,000 (A £55,000, B £45,000, C £20,000); cash paid by D £95,000
Correct Answer
B
Correct Option:
Goodwill £120,000 (A £60,000, B £40,000, C £20,000); cash paid by D £92,000

About This Question

This is Gce Model Questions Vol1 2019 Financial Accounting Question 14. It is one of the objective questions from the 2019 Gce Model Questions Vol1 Financial Accounting examination.

Difficulty level: Hard .

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